Leave a comment

Money and Inflation

These days more things are a puzzlement to me. As I wrote in my most recent piece, I seem to have questions about more things than ever lately.

But there is one thing I have NEVER understood. I watched every episode of Milton Friedman’s Free to Choose and the one thing I could never fully grasp was his discussion of Money.

In my mail I got my latest edition of Imprimus and there was an article, Inflation in the United States, by John Steele Gordon. I recommend it highly.

This article gave me some insights I never got before. The article opens with one of them – that money is a commodity just like oil or meat and it can rise and fall in value just depending on its perceived value which comes from supply and demand just as it does with everything else.

If the supply of wheat is greater than the demand for it, the price goes down. If houses are less available than there is a demand for them, their prices go up. So it is with money. If the dollar is low in supply, the demand for it goes up and it becomes worth more, and it takes less of it to buy more than usual.

Money is the one commodity accepted in exchange for other commodities. But the dollar’s value also depends on the economy that it is a part of. So if America has the strongest economy in the world, with low debt and more quality goods available that people world wide want, then the value of the dollar is high. But if our economy is based on debt and phony valuations, then the value of the dollar goes down. This devaluation occurs on its own. It’s all about supply and demand.

So money is the same as products, valuable according to availability.

Another insight I got is that we could have the same goods and services available but if we print a lot more money, then the value of that commodity – money – gets lowered. If there are more dollars chasing the same quantity of goods, it takes more to buy them. Tight money is when there are too few dollars to buy things. When are there too few dollars? When the Fed prints less money.

What is going on now in Biden’s America? To monetize the debt, they are printing so much money, we can’t keep up with the pace. There isn’t enough money to pay our debt and with the irresponsible multi trillion dollar increases in spending, we can only imagine the danger of the rush in printing of more and more dollars. Every day, this excess of money is there to buy what there is to buy. If the same amount of goods is there and more money is there, supply and demand – it costs more to buy something than it did before there was so much money around. Thus – inflation!

It is foolhardy, indeed dangerous, indeed disastrous to do this. Yet this government is printing away at breakneck speed without any concern of the harm they are causing to Americans. And with the supply chain being interrupted for many reasons – I would say ALL of them, caused by this disgusting administration and its puppeteers – that only compounds the horror.

Now Biden doesn’t want to claim responsibility for every terrible decision he is making and he can’t escape that there is high inflation. So he blames everyone else. So familiar, especially with the left. They cause the problems and then they blame everyone else but themselves.

This very good article goes on to describe the history of inflation from pre Revolutionary times to now in America. I highly recommend it for a deeper understanding of this subject.

But the conclusion is the same at all times.. Inflation, as Friedman said long ago, …is everywhere and always a monetary phenomenon and is only produced by too much printing or giving out of money which is chasing the same amount of goods. This overspending administration has only itself to blame for every bit of the inflation we are suffering under.

This goes triple for the stupid and destructive green policies that are causing the supply of money growing at breakneck speed to chase the slowing down in production of the supply of needed energy. We are up to mostly $5.00 a gallon of gas, but surely that will double if we don’t stop this irresponsible, uncaring bunch in Washington as it headlong leads our beloved country into disaster.

Now I want to tell a personal story just to brag.

A partner of mine was also my dancing friend. We got along very well except he was a liberal. I do not recommend this. These days it is impossible. Then it was merely a great irritant between us.

One day we were at a social event and one of his long time friends was there. The man was a member of the Chicago School of Economics and a colleague of Milton Friedman. My friend introduced me as someone interested in his subject. He wanted to eavesdrop and watch me make a fool of myself.

You must understand that I never had a course in economics in my life. Not one. Everything I know, I have gleaned from reading Buckley, Friedman, and just from experience and common sense.

So I sat down for the privilege of picking someone’s brains. And I didn’t care if I was showing my ignorance because I wanted to learn. I sat there for five minutes simply asking the man questions. At the end of this, he asked me where I learned economics. A smile of anticipation was on the face of my liberal friend. I told the professor I never had an economics course in my life. He said, “You are quite brilliant in that case. You asked outstanding questions, just the right ones.”

I did not gloat. I am so good.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: